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Foreign Direct Investment and the Chinese Economy

A Critical Assessment

Chunlai Chen

Foreign Direct Investment and the Chinese Economy provides a comprehensive overview of the impact of foreign direct investment, with extensive empirical evidence, on the Chinese economy over the last three and a half decades.
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Index

A Critical Assessment

Chunlai Chen

agriculture 1456, 148, 161, 170
ASEAN countries 523, 76, 108, 127;
see also developing countries
banking 1856
Blomstrom, M. 42
Borensztein, E. 42, 151
Buckley, P. 18, 423
capital augmentation 437, 579, 62
capital formation 89, 19, 45
Casson, M. 18
Catalogue for the Guidance of Foreign Direct Investment Industries 1856
Chang, L. 41
Chen, C. 41, 43, 152
Chinese government FDI policies 1712, 18590
income inequality and urbanization development 190
industrial structure of FDI 1878
knowledge spillovers increase 1889
and local land policies 148
market access and restrictions 1856
processing trade 189
regional distribution of FDI 187
Clegg, J. 423
coastal region
effects of FDI, see interregional impacts of FDI on inland economy
inland comparisons 567, 6061, 154, 1659
migration to 278, 168, 184
shares of processing trade (2003–11) 87
collective action 99
competition 20, 21, 27, 79
factor markets and product markets 7980, 188
Cross, A. 423
cultural industries 185
De Gregorio, J. 42, 151
de Mello, L., Jr 42
Dees, S. 41
demonstration effects 20, 46
developing countries 228, 99, 100104, 151
see also ASEAN countries
domestic firms, see host economies, FDI impact on
domestic investment 40
Dunning’s ‘OLI’ framework 1820, 24, 28, 40, 52, 67, 100101, 1045, 121, 124, 1467, 175, 182
E-commerce 186
economic development indicators by province groups 57
economic growth, impact of FDI
on developing countries 223
inland provinces, see interregional impacts of FDI
regional, see regional economic growth
urbanization, see urbanization development
economic theories of FDI 1519, 3944, 1214
education 105, 107, 111, 117, 186
employment creation 10, 11, 19, 100101
labor mobility 20, 278, 68, 7980
migration, see migration
skill intensity and inland income inequality 1212
urbanization development 146, 147
endogeneity issues 515, 5961, 75, 1278, 1579
export promotion 1012, 189
impacts on income inequality 1034, 105, 107, 111, 11316, 179
Firman, T. 151
Foreign Direct Investment
Catalogue for the Guidance of Foreign Direct Investment Industries 1856
contribution
to capital formation (1992–2014) 89, 23, 45
to employment creation (1987–2014) 10, 11, 23
to export promotion (1986–2014) 1012
to tax revenue (1992–2014) 910
export-oriented 1012, 189
government policies, see Chinese government FDI policies
growth of inflows (1979–2015) 24, 65, 148
ASEAN countries comparison 523
impact of, interregional 268
see also interregional impacts of FDI on inland economy 268
impact of, studies on 12, 413
impact on economic growth 623, 184
developing countries 223
see also regional economic growth
impact on income inequality 18081
impact on urbanization development 256, 1834
extant theories 14553
‘OLI’ framework, see Dunning’s ‘OLI’ framework
regional distribution (1983–2014) 57, 187
sectoral distribution (1997–2014) 78
sources of 45
study
main issues 1315
policy implications drawn from 1712, 18590
structure 2932
summary 17485
works on theory of 1519, 3944, 1214
see also income inequality, urban–rural
Gangnes, B. 41
GDP (1980–2015) 14, 37
government policies, see Chinese government FDI policies
Guo, D. 152
Hamnett, C. 151
Heckscher–Ohlin model 24, 100
Hicks-neutral technological progress 47, 51, 72, 789
host cities, see urbanization development
host economies, FDI impact on 1923, 38, 457, 51, 559
interregional impacts, see regional economic growth
Hu, H. 151
Huang, J. 152
Hymer, S. 1517, 18
income inequality in developing countries 268, 99, 100104
income inequality, urban–rural 65, 97118
capital formation 100101, 104
economic development and 1045, 107, 11011
education 105, 107, 111, 117
employment creation 100101, 105
Gini coefficient (2008–15) 97
government policies 190
income distribution 100, 102, 1045, 111
international trade/trade liberalization 1034, 105, 107, 111, 11316
knowledge spillovers 99, 100, 101, 1034, 11113
living standards (1978–2014) 14, 978 and collective action 99
and other developing countries 268, 99, 100104
study
aims and reasons 979
findings and contribution 11618, 1789
framework and empirical model 1046
theories relating to 235, 100104
Dunning’s ‘OLI’ framework 100101, 104, 105
Kuznets inverted U curve 99, 100, 1034, 105, 107, 110, 11617
World Bank estimate (1997) 98
see also Foreign Direct Investment; interregional impacts of FDI on inland economy; interregional impacts of FDI on inland income inequality
industrial linkages 2021, 27, 41, 8081, 878, 121, 122
urbanization development and 147, 14950, 1656, 169, 17071, 18081
degrees of backwards/forwards 1778
inland impediments 184
see also knowledge spillovers
industrial structure of FDI 1878
industry sectors 75
infrastructure facilities 567, 1556, 171
inland provinces
coastal comparisons 567, 6061, 154, 1659, 1845
economic impacts of FDI, see interregional impacts of FDI on inland economy
income inequality, see interregional impact of FDI on inland income inequality
shares of processing trade (2003–11) 87
intellectual property rights 186
internalization advantage, see Dunning’s ‘OLI’ framework
international trade, impacts on income inequality 1034, 105, 107, 111, 11316, 179
interregional impacts of FDI on inland economy 6493
data, variable specification, econometric issues 736
endogeneity problem 75
FDI stock in the coastal region, share of 745, 79
FDI stock in total capital stock 73, 79
instrumental variable regressions 76, 778, 81, 83, 85, 88, 90
other inland provinces, controlling for 75, 76, 79
empirical model 713
knowledge spillovers, estimates: inland economic growth
competition and labor drain effect 7980
domestic market stealing effect 80
industrial linkages, lack of 8081, 8791
levels of industrial development variables 816
levels of processing trade 8691
results 769, 912
processing trade 66, 70, 745, 8081, 8691
study findings: overview 1768, 17980
study methodology
contribution and findings 66, 923
data and testing 66, 73
framework and empirical model 7073
theories on knowledge spillovers 6770
firm-level data studies 6970
modern growth theory 68
provincial-level data studies 70
theories on urbanization development 14953
urbanization development, see interregional impacts of FDI urbanization
see also interregional impacts of FDI on income inequality; income inequality, urban–rural; regional economic growth
interregional impacts of FDI on inland income inequality 11940
data, variable specification, econometric issues 1248
empirical model and estimation results 1245, 128
endogeneity problem 1278
FDI stock in other provinces 1256, 131
FDI stock in total capital stock 125, 13031
other inland provinces, controlling for 1267
employment creation/skill intensity 1212
international trade impacts 1034, 105, 107, 111, 11316, 179
knowledge spillovers 122, 131, 1323, 1367
Kuznets inverted U curve model 120, 1212, 124, 126, 129
migration and income remittance 1223, 1357
regression results 12837
coastal and inland difference, estimation 1334
first-stage instrumental variable models 130, 135
study
aims and reasons 11920, 1234
findings and contributions 13840, 17980
theory and literature 1214
see also income inequality, urban–rural; interregional impacts of FDI on inland economy
interregional impacts of FDI on
urbanization
coastal/inland comparisons 1545, 184
regression results 1624, 163, 1659
theories on FDI flows 14953, 184
investors 45
ownership advantages 4041, 122
Jiang, S. 151
Kang, C. 151
knowledge spillovers 1920
definition and processes 678
diffusion influences 176
demonstration effects 20, 46
government policies 1889
income inequality and 99, 100, 101, 1034, 11113
interregional impacts of FDI 122, 131, 1323, 1367
macroeconomic consequences of 689, 756, 122, 150
provincial economic growth 51, 55, 57
regional economic growth 54, 6061
studies on 3944, 6770
firm-level data studies 6970
modern growth theory 689
provincial-level data studies 70
urbanization development 149, 1656
see also industrial linkages
Kombaitan, B. 151
Kuznets inverted U curve, applied to income inequality 234, 99, 100, 1034, 105, 107, 110, 11617, 180
inland urban–rural 120, 1212, 124, 126, 129
labor mobility 20, 278, 68, 7980
migration, see migration
land acquisition 148, 161
Lee, J.-W. 42, 151
Lipsey, R. 42
living standards 14, 978, 178
and collective action 99
location advantage, see Dunning’s ‘OLI’ framework
Luo, Q. 151
macroeconomic consequences of knowledge spillovers 689, 756, 122, 150
manufacturing 78, 66, 75
market access and restrictions 1856
migration
higher pay 147, 149
inland to coastal 150, 184
statistics (2014) 168
push and pull forces 1459, 149, 1612
remittances and inland income inequality 278, 1223, 1357
rural to urban areas 99
multinational enterprises (MNEs) 1626, 101, 1212, 13031, 1469
ownership advantages 4041, 122, 149
neo-classical growth models 22, 39
Ng, L. 41
Noy, I. 41
‘OLI’ framework, see Dunning’s ‘OLI’ framework
ownership advantage 4041, 122, 149
‘OLI’ framework, see Dunning’s ‘OLI’ framework
Pannell, C. 151
policies, see Chinese government FDI policies
Pradono, P. 151
processing trade
export policies 12, 189
inland provinces: interregional impacts of FDI 66, 70, 745, 8081, 8691, 1656, 17071
study findings 1778
shares per province in total trade (2003–11) 87, 1323
Qi, Z. 151
regional distribution of FDI 57, 187
regional economic development; see also host economies, FDI impact on
regional economic growth 1314, 3763
capital augmentation 437, 579, 62
coastal and inland comparisons 567, 6061
empirical model 447
roles played by FDI 456
total factor productivity 46
FDI distribution (1983–2014) 57
FDI impacts
provincial level 4955, 623
regional differences 559
theories/growth models 3944
FDI stock in the coastal region 745
FDI stock in total capital stock 48, 514, 5960, 79
government policies 187
host provinces’ economy/technology 38, 457, 51, 559, 62
knowledge spillovers 46, 51
estimation results 54, 6061
instrumental variables 55, 61
studies on 3944
local government land policies and 148
regression results and explanations 4955, 57, 62
endogeneity issues 515, 5961
first-stage instrumental variable regressions 55, 61
of production function: by region 58
study findings 613, 1767
study methodology 29, 389
variables and data 489
see also interregional impacts of FDI on inland economy
research and development (R&D) 22, 56
technical transfers 23, 46
sectoral distribution of FDI (1997–2014) 78
Selvanathan, E. 41
Selvanathan, S. 41
services 78
Shanghai Pilot Free Trade Zone 186
Shi, Y. 151
Special Economic Zones (SEZs) 23, 65
spillover effects, see knowledge spillovers
Stolper–Samuelson theorem 24, 100
studies on impacts of foreign direct investment 12
Tang, S. 41
tax revenue 910
technologies
agricultural 148, 170
general purpose technologies 40
Hicks-neutral technological progress 47, 51, 72, 789
industrial structure of FDI 1878
intellectual property rights 186
interregional imitation 68, 1212
research and development (R&D) 22, 56
technical transfers 23, 46
technological progress, see regional economic growth
telecommunications 185
trade, international, impacts on income inequality 1034, 105, 107, 111, 11316
trade, processing, see processing trade
Tuan, C. 41
urban–rural income inequality, see
interregional impact of FDI on
inland income inequality
urbanization development 14372
agriculture 1456
decline 1456
technologies and productivity 148, 161, 170
data, variables, model specification 1539
city variables, controls 1556
empirical model 1567
endogeneity problem 1579
FDI stock in other regions 1545
FDI stock in total capital stock 1534, 1567, 158
interregional investigation 1545, 182
economic structural changes 1467
employment creation 146, 147
FDI flows, effects of 17071
FDI flows, theories on impacts 256
interregional 14953, 184
regional 1459
studies on 1513
government policies 190
host cities 1534, 16069
coastal and inland comparisons 1659
estimation of impact of FDI 16062
interregional impacts 1625
industrial linkages 147, 14950, 1656, 169, 17071, 18081
degrees of backwards/forwards 1778
inland impediments 184
knowledge spillovers 14950, 1656
land acquisition 148
migration 1456
higher pay 147, 149
inland to coastal 150, 168, 184
push and pull forces 1479
New Urbanization Plan 143
regression results 15969
dynamic panel system GMM estimation 15960
estimation results (2004–13) 161
impact of FDI on a host city 16062
interregional estimations 1624, 163, 1659
spillover effects, interregional 1689
study
aims and reasons 15
data and analysis tools 1523
findings and policy implications 1445, 17072
overview 1814
urbanization rate (1980–2013) 143
Vernon, R. 17
Vu, T. 41
Walcott, S. 151
Wang, C. 423
Wang, X. 152
Wei, S. 42
Whalley, J. 42
Wu, Y. 48, 152
Xin, X. 42
Xu, X. 151
Yin, C. 151
Zejan, M. 42
Zhang, K. 151
Zhang, Y. 41
Zhao, B. 41